50,536 research outputs found
EconomicDynamics Interviews Per Krusell on Search and Matching
No full textPer Krusell is Professor of Economics at Princeton University and Visiting Professor at the Institute for International Economic Studies in Stockholm. Per has worked on macroeconomic issues including technology and economic growth, optimal fiscal policy and political economy, and consumer inequality, recently focusing in particular on wage inequality, labor-market frictions, and time-inconsistencies in policy for both consumers and government.
Aggregate unemployment in Krusell and Smith’s economy: a note
No full textUsing data on workers’ flows into and out of employment, unemployment, and not-in-the-labor-force, I construct transition probabilities between “employment” and “unemployment” that can be used in the calibration of economies such as Krusell and Smith’s (1998). I show that calibration in Krusell and Smith has some counterfactual features. Yet the gains from adopting alternative calibrations in terms of matching the data are not very large, unless one assumes that the duration of unemployment spells is well above what is usually assumed in the literature.
Time-consistent public policy
No full textIn this paper we study how a benevolent government that cannot commit to future policy should trade off the costs and benefits of public expenditure. We characterize and solve for Markov-perfect equilibria of the dynamic game between successive governments. The characterization consists of an inter-temporal first-order condition (a “generalized Euler equation”) for the government, and we use it both to gain insight into the nature of the equilibrium and as a basis for computations. For a calibrated economy, we find that when the only tax base available to the government is capital income—an inelastic source of funds at any point in time—the government still refrains from taxing at confiscatory rates. We also find that when the only tax base is labour income the Markov equilibrium features less public expenditure and lower tax rates than the Ramsey equilibrium
The underestimated virtues of the two-sector AK model
No full textWe show that the two-sector version of the AK model proposed by Rebelo (1991) can be read as an endogenous growth extension of Greenwood, Hercowitz and Krusell (1997). By confining constant returns to capital to the investment goods sector, the model generates endogenously the secular downward trend of the relative price of equipment investment and the rising real investment rate observed in US NIPA data. Whereas Jones (1995) criticizes that the one-sector model fails to reconcile the empirical facts of trending real investment rates and stationary output growth, this incompatibility vanishes in the two-sector version. Finally, a simple technological shock can reproduce the ‘1974’ break in post World War II US data. Thus, AK-type endogenous growth models comply much better with empirical evidence, once they are augmented with a strictly concave consumption sector.AK model; embodiment; endogenous growth; obsolescence; ‘1974’
Offentlig utgiftspolitik och tidsinkonsistens1
No full textÄven den välvilligaste politiker frestas ständigt att bryta mot givna löften och utfästelser. Det har ekonomer känt till sedan Kydland & Prescott [1977], och alla andra har väl känt till det sedan urminnes tider. I denna artikel tar författarna en ny titt på det så kallade tidskonsistensproblemet i ekonomisk politik. Till skillnad från många tidigare studier så är syftet inte att hitta någon ”lösning” på problemet utan att reda ut precis vad som händer i en värld där dagens politiker inte kan binda sina efterträdare (eller ens sig själva i senare tappning) men är medvetna om exakt vilka följder dagens politik har för privat och politiskt beteende nu och i framtiden. Till stor del är det här ett metodproblem som inte närmare låter sig beskrivas i en populärvetenskaplig uppsats. Men på väg mot metodproblemets lösning gör författarna några nya, intressanta och delvis också oväntade kvalitativa insikter. Det visar sig i synnerhet att tidskonsistensproblemet i ett viktigt sammanhang inte är fullt så katastrofalt som man skulle kunna tro, om bara politikerna är tillräckligt sofistikerade
News shocks and business cycles
No full textThis article considers the question, raised by Beaudry and Portier in their recent articles, of whether "news shocks" can lead to expansions and contractions that look like business cycle movements. News shocks are to be thought of solely as affecting expectations (regarding future events) and thus do not influence current resource restrictions at all. So the question is, for example, whether news about lower future productivity could lead our key aggregate variables—consumption, investment, and employment—to co-move down now. Beaudry and Portier make the point that standard neoclassical models clearly will not allow this outcome, and they, along with other researchers in follow-up work, suggest elaborations on the standard model that would. In the present research, we review this literature and propose a very simple model that does quite well in predicting co-movements in response to news shocks. The model is based on a departure from competitive labor markets: It uses a standard Diamond-Mortensen-Pissarides view that unemployment is determined as a function of search/matching frictions.Business cycles ; Economic growth
Capital Accumulation And Present-biased Preference
No full textThis paper reexamines the capital accumulation within a neo-classical growth model under the assumption of hyperbolic discounting as well as endogenous preference, finding that 1) two kinds of Naifs¡¯ behavior coincides under log utility; 2) increasing marginal impatience due to capital accumulation itself will negatively affect the steady state locus of consumption and capital; 3) the effect of hyperbolic settings through effective rate of preference is still ambiguous; 4) we prove the saddle-point equilibrium property for the steady state under various assumptions about individual¡¯s preference. Our model also justifies Max Weber's idea that although spirit of capitalism is an engine to capital accumulation, the subsequent growing wealth will damage this engine.hyperbolic discounting, time-inconsistent, capital accumulation, spirit of capitalism
The IT revolution : is it evident in the productivity numbers?
No full textInformation technology ; Productivity
Jeremy Greenwood and Per Krusell, "growth accounting with investment-specific technological progress: a discussion of two approaches" a rejoinder
No full textThe May 2007 issue of the Journal of Monetary Economics published a paper of mine entitled ‘Investment-Specific Technological Progress and Growth Accounting’ which critiqued the work of Greenwood, Hercowitz and Krusell. I argued that the Greenwood-Hercowitz-Krusell (GHK) model is a special case of a two-sector, neoclassical growth model with differing rates of technical progress in the two sectors; that a version of Jorgensonian growth accounting can be constructed for this two-sector model and hence for the GHK model; and that there is therefore a mapping between the growth accounting concepts of total factor productivity (TFP) growth in each of the two sectors, and GHK’s concepts of investment specific and neutral technological progress. The same issue of the JME published a response by Greenwood and Krusell (‘Growth Accounting with Investment-Specific Technological Progress: a Discussion of Two Approaches’). This paper is a rejoinder to theirs. It attempts to delineate both the common ground and the remaining areas of disagreement
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